Commentary on how China and the world are adapting to each other -- or not.

December 30, 2013

A China-Euro Solution for the Redskins

I'm a professional China specialist, but I'm a lifelong Redskins fan. My two identities have always remained separate. When I'm in the US, Sunday afternoons are for watching NFL football. When I'm in China I can't even see the games. And explaining American football to my Chinese friends -- from the uniforms to the thousands of rules -- shows how utterly strange the sport is to outsiders.

But there's now a way for my two lives to intersect. The NFL regular season ended yesterday, and my Redskins finished with 8 consecutive losses, to wind up with a 3-13 record, their worst performance since 1961. Over the past two decades the Redskins have had the 6th worst cumulative record in football. They're an utter embarrassment to those of us who came of football age in the 1980's, when the Skins won 3 Superbowl championships (in 1982, 1987, and 1991). With a pitiful record and a team name that understandably invites charges of racism, fans are sullen and at a loss as what to do. In fact, the NFL in its entirety seems increasingly problematic because of the long-term injuries players incur as a result of the sustained violence and the astronomical ticket prices (minimum $200) that put attending games out of most families' reach.

How might we fix both the Redskins and the NFL? China can help, with a little insight from our friends on the other side of the pond. No, I don't mean a rich Chinese entrepreneur who likes crepes should buy the Redskins, though that might widen the menu choices at games. And I don't mean the NFL should become more authoritarian and use an iron fist to outlaw poor play or secretly choose the Redskins as the season's winner.

Instead, China's economic experiment in whether success is determined more by private ownership or competition can help point the way to a football renaissance. Although China's state-owned enterprises (SOEs) have wracked up more debt and losses than their private cousins, SOEs' performance improves remarkably when they face real competition. In monopoly sectors (such as utilities, steel, and natural resources), SOEs have grown lazy under layers of protection. In competitive sectors (such as telecoms and autos), SOEs have responded to the challenges posed by private and foreign firms, and have done much better. It's the competitive environment, not the genetic imprint of ownership that shapes corporate behavior.

What is true for China and companies is true for the NFL and football teams.

Some fans, including yours truly, despise the current Redskins owner, Daniel Snyder. He makes splashy hires for coaches and players who don't pan out, and he regularly meddles, sending the teams' record down but the drama sending his income up. His 15-year ownership era has been an amazing success -- for him. He's made millions of dollars, and the franchise is worth hundreds of millions more than the day he bought it.

But as distasteful as his ownership has been, Snyder is acting rationally in his environment. The NFL is a legalized monopoly in which the owners have 100% control of their teams, they cannot be forced to sell their teams, no other NFL teams can form in their locality without league approval and a huge bribe (excuse me, payment), and their teams face no penalty for poor performance.

The solution to this problem is not to ban bad owners or have everyone copy the Green Bay Packers, who are owned by townspeople of Green Bay. Rather, what the NFL needs is more competition. I don't mean longer seasons or salary caps (though the latter is modestly helpful). Instead, the NFL needs to be open to admitting new teams into the league and kicking bad teams out of it.

For the specifics of the solution, my inspiration is not China, where professional sports are still a joke (Gilbert Arenas plays for the Shanghai Sharks, need I say more), but European soccer (original football). There are several tiers of professional soccer in each country, each with a substantial number of teams. At the season's end, the lowest performing teams of the top league (in the UK, that is Barclay's Premiere League) get "relegated" to the next league down, and the top performers of the lower league get to move up. The result is that every team has a huge incentive to perform as best they can throughout the season because the financial consequences for not doing so are devastating.

If the Redskins (or any sorry NFL team - hey, Houston Texans!) faced the possibility of being demoted to a junior league with less revenue-generating potential, that would be all that is needed for Mr. Snyder to make much wiser decisions. And his football players would also get the signal that mailing it in on any given Sunday might result in their salaries being chopped by 90% if the Redskins were demoted to a new "B League."

Of course, it's possible they would still perform badly and be relegated down, to the point where the franchise would entirely collapse. But I'm fine with that: is it really the American spirit to keep a horrible team (or company) on life support indefinitely just because, to paraphrase Jerry Seinfeld, we like their laundry? No. Let a new, better run team take their place.

To get from the current closed system to more open competition, Congress would first need to revoke the NFL's monopoly rights on teams, and with it, their guaranteed TV money. That would open the way for other investors to create teams who could then form a second-tier league. The most natural final part of the equation would be to integrate college football into the system. Universities would not only be able to feed players into the higher ranks, as occurs now in the draft, but they also would have the opportunity themselves to move up to higher tiers and play teams of similar caliber. What football fan wouldn't want to see the Alabama Crimson Tide take on the Houston Texans, or (heaven help us, please), the Dallas Cowboys? And not just as an exhibition or with pride at stake.

Moving toward a genuinely competitive system would be opposed by just about everyone who has power today: the NFL and its owners, Congress, the TV networks, college conferences, and big universities all make a killing under the current closed systems. And when economic arguments fail, they can all point the supposed immorality of destroying college students' "amateur" status. Oh, please!

But there would be two winners in a more competitive system. The first would be the fans, from those of NFL teams down to Division-III tiny football programs in the smallest of towns. We'd get to see much more competitive action, and teams that played extremely poorly would get knocked down a peg until they turned things around. The second winners would be the players. They would be in a better position to demand more from owners, both professional and collegiate, which would lead to better pay, treatment during the season, and support when their playing days are over. The NFL, NCAA, and others could be reconfigured and new regulations adopted federally and locally to ensure greater transparency and fairness, and perhaps more funds going toward improvements in community infrastructure and not just stadiums.

So I really don't care if Snyder sells or sticks around, or who is hired as the Skins' new head coach to replace Mike Shanahan. Until NFL teams are forced to operate in a more competitive environment, as many Chinese SOEs face in many segments of their economy, the NFL will be a monopoly that serves its owners and their minions. Us fans will continue to get the shaft.